Almost two years later, Morningside has completed its first acquisition under Klein and Lessard, buying Israel-based Net-Translators on March 10, 2019. The terms of the deal were not disclosed.

Advertisement

Slator contacted Morningside co-CEOs Klein and Lessard to find out more about the deal and Morningside’s future plans.

Headed by Co-founder and CEO Shy Avni, Net-Translators is based in Tel Aviv and operates satellite offices in the UK, US, and Argentina. Klein and Lessard confirmed that Net-Translators’ two owners will be leaving, but that all of the other “key leaders will stay on.” They said that Net-Translators was advised by BCMS Israel in the deal.

It is a good geographical fit for Morningside since the company already has a local presence in Israel, and will now become “one of the largest language service employers in Israel,” a company press release claimed. Net-Translators’ 30-strong headcount will join Morningside’s existing staff of nearly 200 employees globally.

As well as sharing hubs in Tel Aviv, the two companies also have some vertical alignment. Morningside competes in the IP and patents translation space alongside the likes of Welocalize, RWS, and IP service provider Questel’s MultiLing, and also has a focus on clients in life sciences and the legal sector.

Net-Translators also works in life sciences and has a footprint “among medical device makers in EMEA and Asia,” Klein and Lessard said. “We have overlap with respect to parent companies, but no direct overlap with regards to specific divisions and language service buyers,” the Morningside CEOs said.

Rather than getting a total rebrand, Net-Translators will be renamed “Net-Translators — a Morningside Company.” The CEOs declined to share company revenues for Net-Translators, which was founded in 2002, but said that Morningside expects to achieve “between USD 60m and USD 65m in 2019.” Morningside’s revenues were USD 48.8m in 2018.

NMT & Industry Consolidation

The technology capabilities of the two companies will be merged into Morningside’s “existing framework,” Klein and Lessard said. Morningside works with memoQ for translation productivity and also has some proprietary technology, such as IQ, which was launched recently and is integrated into Morningside’s proprietary IP platform. IQ offers “pricing and forecasting capabilities for IP users and foreign filers,” which is intended to encourage IP practitioners to move away from email in favor of platform usage.

On the matter of neural machine translation (NMT), Klein and Lessard “constantly explore and test multiple options the market has to offer,” since the two believe that NMT is of value to IP translations under certain circumstances.

“In some instances, the technical nature of IP lends itself well to NMT, while the fact that each and every foreign filing is novel limits the application,” they said. Yet, given that “our clients have no margin for error,” humans are still needed to interact with technology to ensure quality output, the pair added.

“In some instances, the technical nature of IP lends itself well to NMT, while the fact that each and every foreign filing is novel limits the application” — Tom Klein & Roland Lessard, co-CEOs, Morningside Translations

Klein and Lessard confirmed that Morningside will remain focused on the “premium verticals of IP, legal, and life sciences.” Although there are many paths to achieve growth “that doesn’t mean each of those paths is created equal or optimal,” they added, perhaps with an eye on the potential impact of machine translation on unit rate prices across the language services market.

After the Net-Translators acquisition, Klein and Lessard are likely to continue M&A, planning to target companies in their core “regulated and premium markets.” As to their forecast for the wider market in the near term: “We see continued consolidation over the next few years at an even faster pace,” they said.

In their estimation, this consolidation will center on the midfield of the language services landscape, or what Slator has termed the Challengers segment of LSPs (between USD 8m and USD 25m in annual revenues).

“Whereas three or four years ago, a USD 10m or USD 12m LSP was looking and feeling ‘large’ on a relative basis, it is now those owners who more often than not are thinking about finding a logical acquirer,” Klein and Lessard predicted.